For Conrad Black, a chill wind blows through cyberspace

Media - Ian Hargreaves

With Conrad Black, military analogy is irresistible. It is sometimes difficult to imagine, in civilian dress, a man who enjoys being compared to Napoleon and who numbers among his close business associates Richard Perle, who convinced Ronald Reagan about the Star Wars nuclear shield.

So, with Black, you expect Austerlitz or Waterloo. Yet his latest plan - to make most of Hollinger International's assets available "to facilitate the current trend to larger, consolidated, multi-media entities" - looks like nervous tactics, not cool strategy. In plain English, Black is putting his company at the mercy of the dot-com tearaways: it is as if Napoleon had felt obliged to share his imperial power with the President of a fledgling United States.

In even plainer English, the statement looks like a "For Sale" sign over Black's newspapers. True, Black went on to insist that Hollinger's prize assets, among them the Daily Telegraph, would be available only for "electronic associations with other groups in larger combinations that will maximise future franchise values while retaining its [Hollinger's] control of those assets". But that didn't ease nerves at Canary Wharf, where Black is regarded as a good proprietor, someone who likes newspapers, as well as the pomp that goes with owning them. Who else but a newspaper romantic would have set out to create a new national newspaper in Canada? Although heavy losses continue and advertising disappoints, the National Post has already built a circulation to rival the long-established Globe and Mail.

Yet Black is haunted by the stock market. He has, over the years, pulled all sorts of stunts to achieve the desired degree of control over the company's shares, but he also craves the most handsome valuation. In this, he has consistently failed. Despite the solid prospects of its business, Hollinger shares walk like dogs and bark like dogs. They are dogs.

Hollinger is not the only old media company with this problem, but its difficulties are compounded by the market's distrust of Black, based upon previous episodes of financial engineering, and by its assumption that a company so well defended by friendly share stakes is unlikely to see its value tested in the takeover market. Whether or not Black intends to sell - and it is difficult to imagine that at he is ready to abandon the delights of salon politics - he is desperate to assert the true value of his portfolio.

What brings this to a head is the internet,where Black and his lieutenants are, a touch unfairly, considered part of the dinosaur generation. In Britain, Black pioneered the on-line national newspaper with the Electronic Telegraph in 1994, and Hollinger Digital has assembled a useful bag of investments, some of which have achieved the inflated valuations that the market reserves for internet companies with no visible prospect of profitability. The most outstanding example is a personal finance site called Interactive Investor International.

These experiences have twisted the knife in poor Black's spleen. Triple-I has demonstrated that the stock market can simultaneously worship an internet start-up, while discounting the value of any holding of the same enterprise that happens to be parked inside an old media company.

The Electronic Telegraph has won awards but, like so many other electronic newspapers, it doesn't generate enough revenue to justify the heavy investment. The original idea was to build up custom for the Telegraph website by offering free registration, which would then bountifully mutate into paid subscription. This is now abandoned in favour of a continued free service, in the hope that advertising on the site and e-commerce linked to it will deliver the goods. Meanwhile, the Electronic Telegraph looks short of investment - a daily English newspaper marooned on the internet, where it competes directly with organisations like the New York Times and the BBC.

Hollinger is not alone in this dilemma. Even Rupert Murdoch has so far looked like a man who doesn't understand the rules of the cyber game. The one British old media company that has broken out of the box - and it is an example that haunts Black - is Pearson where, under Marjorie Scardino's leadership, has got huge investment and promotion and Pearson's share price has soared.

Yet, even this example must be a source of worry because the FT's internet business operates not in the geographically confined domain of the general national newspaper, but in the global world of competing business-information services. So the Daily Telegraph can outsell the FT on UK newstands by more than five to one, but on the web, gets 29 million impressions a month, against the Electronic Telegraph's 15 million. And neither of these is in the same league as the BBC, with 78 million, or Yahoo!, with 210 million.

What Black is up against is the unpleasant thought that the internet's browsability favours niche players on one side and all-purpose multimedia providers on the other, squeezing national newspaper owners painfully in the middle. Titles like the Daily Telegraph could turn out to be less valuable in cyberspace than the more closely targeted small-town papers Hollinger now plans to sell.

And even if the investment bankers can discover a partner fit for an Emperor, it is hard to see how Black can avoid exchanging the undervalued currency of his own group for the funny money of the dot com. The Emperor's clothing starts to look scanty, with that wind blowing from Moscow.

The writer is professor of journalism at Cardiff University

This article first appeared in the 08 May 2000 issue of the New Statesman, The tiny group that controls us all